Does Amazon want TI's OMAP?

Firms won't comment on report by Israeli newspaper that they are in advanced negotiations on the sale of the apps processor line.

Amazon's relatively
inexpensive Kindle Fire tablets, which feature OMAP applications
processors, are increasingly seen as a pesky low price competitor to
Apple Inc.'s iPad. But it would come as a surprise to many if Amazon
took a page from Apple's book and moved toward vertical integration,
including designing its own chips.

Carolina Milanesi, an analyst
for consumer technologies at Gartner Inc., said she was skeptical of
the report. Amazon's strategy is to make money on services, not
hardware, she said. "As far as an integrated offering goes I think there
are higher priorities when it vines to acquisition than not owning the
silicon," Milanesi said.

Amazon's Kindle Fire and Kindle Fire HD
tablets use OMAP applications processors. Amazon sells its tablets
basically at cost in an effort to get more people buying content from
Amazon. According to UBM TechInsights, the Amazon Kindle Fire, which
retails for $159, carries a bill of materials of $148. Adding in costs
for marketing and R&D, the firm roughly breaks even on each device
sold, according to UBM TechInsights.

Strauss said a move by
Amazon to acquire OMAP seems like a stretch. But he said Amazon is
interested in expanding the Kindle product line and could also be
contemplating developing its own branded smartphone.

Strauss
and others believe that TI's decision to stop focusing OMAP on the
smartphone and tablet markets stems from a trend toward integration of
the applications processor and the cellular baseband. TI began gradually
pulling out of the baseband IC business a few years ago and lacks the
capability to pair OMAP with an advanced baseband.

Strauss said
if TI did sell OMAP, it would likely be at a discounted rate. While
product lines like OMAP might typically be sold for three to five times their annual revenues, TI in this case might have to settle for something lower, he said.

Roger Kay, a technology market analyst Endpoint Technologies Associates, said, assuming the report is true, Amazon must decide if whatever the purchase price for OMAP might be would be worth the added degree of control the company would get from owning its own chip designs and optimizing them for its products.

"Given that Apple is very nearly the benchmark for an integrated ecosystem, Amazon isn't that far behind in acquiring the pieces that you have to have to make a complete stack," Kay said.

Some years ago Nokia used to make their on SoCs and then suddenly decided to stop. At the time they annually sold about 400M phones and obviously reached the conclusion that it even at those volumes it did not make economic sense to keep designing asics. Also Nokia really excels at sourcing and logistics, that was never the problem.
From that I am quite convinced that there is very little reason for a phone maker to do custom SoC. The only reasonable explanation for Apple doing it is fear of getting cloned.
For Amazon to go that route is just ridiculous, they should drop Omap anyhow and look to MediaTek or Boxchip to cut costs even further.

I would agree. My initial reaction is that this doesn't make a great deal of sense for Amazon, but I do appreciate what Roger Kay says on page 2 of this story. Like everything else, it all depends on the purchase price. If they can get OMAP (or some portion of OMAP) for a song, maybe it makes sense. Otherwise, I don't know that it does. I am also not totally convinced that there really are advanced negotiations taking place on this.